Competency 2.2 - identify how economic systems answer the three basic economic questions

Question 1

traditional economy

Answer 1

economy that relies on custom/tradition to determine production and distribution questions; tends to be slow to change and ill-equipped to propel a society into sustained growth

Question 2

command economy

Answer 2

economy that relies on a central authority, such as a government or dictator

Question 3

market economy

Answer 3

economy that relies on competition between buyers and sellers as they decide what good and services will be produced; there is no central authority and individual self-interest rules over the good of others

Question 4

mixed economy

Answer 4

economy that contains elements from traditional, command, and market exonomies; most economies are mixed, but with different ratios of the three

Question 5

capitalism

Answer 5

an economy in which productive resourced are owned by private individuals

Question 6

socialism

Answer 6

this mixed economy states that productive resources are all owned collectively by society, thus, the allocation of them remains under governemnt control; markets are used to determine the prices of goods and wages

Question 7

planned economy

Answer 7

this mixed economy states that all means of production are publicly owned; a central authority makes decisions on what will be produced and how such production will occur